Sharply higher numbers Tuesday in both the physical and futures markets left quite a few cash traders puzzled, since they were seeing precious little fundamental support for rising prices.

However, they couldn’t deny that cash upticks of 12-30 cents or so, consistent across all geographic market areas, were pretty close on average to matching the screen’s gain of 23.6 cents.

“Short-covering and other technicalities are all I’m hearing about why the Nymex was so strong,” a marketer said. “I’m not sure how much of that carried over into cash.” However, another source pointed out that Tuesday marked the fourth straight gas futures advance, although last Thursday’s gain of only 0.9 cents was hardly big enough to matter. The successive screen gains laid a foundation of psychological support for cash despite a general lack of fundamental demand, he said.

A Northeast trader confessed to being “a little shocked” at the dual run-ups in futures and cash, saying there was nothing obvious, such as supply, transportation or weather issues, to explain Tuesday’s price strength. The market is seeing some “decent” physical demand due to cool weather, but nothing extraordinary, he said.. The Northeast is getting down to the high 30s occasionally at night, he went on, but that’s certainly not unusual for October.

To a Southwest/Midcontinent trader, the cash market did not seem to be unduly influenced by the screen. She noted that production-area physical prices continue to lag well behind November futures. Besides the obvious comparison of Henry Hub averaging about half a dollar below Tuesday’s screen settlement of $5.140, the trader pointed out that Waha basis Tuesday was about minus 70 cents, compared to what she said was usually about minus 20 cents in more conventional markets. Part of the reason for such a huge gap is the demand anomalies of a shoulder month, the trader said.

The outage of the Comanche Peak 2 nuclear unit is having little impact in the intrastate Texas and Permian/Waha markets, she continued, because “there’s not enough weather for it to make much of a difference.” The Midwest, however, was experiencing a number of nuclear plant outages, which could be driving stronger gas demand.

Pipeline linepack situations were shifting again. Northern Natural Gas let a System Underrun Limitation notice (indicating more gas in the pipe than desirable) lapse for Wednesday. The fuel buyer for a Midwestern utility connected to NNG system commented, “We’re in the 80s, above normal [for this time of year], and enjoying it.” Meanwhile, warmer weather in its market area was causing drafting of the Florida Gas Transmission system and prompted it to issue an Overage Alert Day notice Tuesday (see Transportation Notes).

One source said he tried to find some weather somewhere — anywhere! — to justify major price gains, but failed. He ticked off these near-term outlooks: Northeast, starting to warm up after early-week chill; South, widespread precipitation limiting highs to the 80s or less (and thus limited cooling load); Midcontinent/Midwest, unseasonable warmth sticking around for a while longer; and West, normally warm and dry except for a Pacific storm taking aim at the Pacific Northwest. Not exactly what he would call bullish, the source concluded.

The National Hurricane Center quit issuing advisories Tuesday afternoon on former Hurricane Kate, which had become a tropical storm as it sped toward the north-northeast well to the east of Newfoundland. Except for a tropical wave in mid-ocean, the Atlantic tropical scene was quiet otherwise.

Lehman Brothers analyst Thomas Driscoll said cold weather last week led him to forecast an injection of 75 Bcf in this week’s EIA report. Such a volume would leave inventories at 2,863 Bcf, 217 Bcf lower than last year and 25 Bcf lower than the five-year average, he said. Driscoll’s analytical counterpart at Citigroup, Kyle Cooper, said his final storage report estimation is for a build of 68-78 Bcf, significantly higher than his initial guess of 60-70 Bcf.

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